A federal bankruptcy judge in Texas has dismissed fraud related claims filed against several banks and financial institutions connected to the collapse of McClain Feed Yard and an alleged ghost cattle scheme tied to the cattle industry.
The ruling stems from bankruptcy proceedings involving former cattle operator Brian McClain and multiple related businesses that collapsed in 2023 following allegations of fictitious cattle inventories and check kiting activity.
Court records show Chapter 7 Bankruptcy Trustee Kent Ries filed claims against lenders and financial institutions, alleging they knowingly enabled fraudulent activity connected to the operation before the companies entered bankruptcy.
However, the U.S. Bankruptcy Court for the Northern District of Texas dismissed the fraud claims with prejudice, preventing those specific claims from being refiled in Texas bankruptcy court.
The judge ruled the bankruptcy trustee could not pursue certain state law fraud claims because the debtor companies themselves were directly involved in the alleged wrongdoing. Under bankruptcy law, trustees inherit the same legal limitations held by the original companies.
The case centers around allegations that cattle inventories tied to the McClain operation were overstated or entirely nonexistent, creating what some investors described as “ghost cattle” tied to financing agreements and feeding contracts.
While the fraud related claims against lenders were dismissed, several bankruptcy specific claims involving alleged fraudulent transfers and preferential payments remain active in court.
Separate investor lawsuits tied to Kentucky cattle interests are also still pending in federal court.
The collapse of McClain Feed Yard sent shockwaves through portions of the cattle industry in 2023 as producers, lenders and cattle investors attempted to determine the scale of losses connected to the operation.